City Hall's Desire For A Fancy Downtown (Without Too Many Poor People) Costs Developers $30 Million

After the city killed plans for affordable housing at 1600
Pacific Avenue, it turned the building over to a new developer. He says hes going to rehab the building as The Grand
Ricchi, which he says means The Great Wealthy Dallas.

Don Hill, the Dallas City Council member recently sent to federal prison for 18 years for bribery and corruption, didn't use a baseball bat on people.

He was a lawyer. He used parliamentary procedure.

The table, I call it. Hill knew developers always have a clock ticking—money sifting away like sand in an hourglass—so he tabled their issues at council, and re-tabled, and re-tabled until he got his way.

Take the curious case of Curtis Lockey, Craig MacKenzie and the LTV Tower 1600 Pacific Avenue building. Lockey and MacKenzie, who have long, serious résumés as commercial developers, tried to do a redevelopment deal that would conform to federal law.

Look. This is about a square deal versus the table. You invite people to sit down and play poker with you. No fair slipping them a roofie and pocketing the chips.

LTV Tower is a typical downtown Dallas albatross—a 1960s 33-story office building that Lockey and MacKenzie wanted to convert to apartments. At first the city was gung-ho. In 2007 it gave them the go-ahead.

Ah, but here is where the affordable housing issue rears its troublesome head. The total project cost was going to be about $112 million, with varying amounts, depending on the version of the deal, coming from the U.S. Department of Housing and Urban Development (HUD).

HUD has a very clear guideline. It's based on the law authorizing the loan program that Lockey and MacKenzie intended to use. If you take HUD's money for a multifamily housing project, HUD says your project must include at least 51 percent "affordable" and "low income" units.

We're not talking about public housing here. Minimum "affordable" rents would have been about $500 a month. To get one of those deals, you would have been required to have a job and good credit. We're really talking about making it possible for working people and young people to live downtown.

It's rent control. It lasts for 15 years. Take the money, you have to control the rents for 51 percent of the building for 15 years. Don't take the money, you are free to charge what you want.

City Hall wants people to take the HUD money, because City Hall believes federal subsidy is the only way we can convert our beleaguered downtown into apartments. But City Hall, according to its own repeated statements of policy, doesn't want converted buildings downtown to include 51 percent housing for non-affluent persons.

As Lockey and MacKenzie demonstrate in their official complaint to HUD, Dallas city policy states overtly that no project should exceed 40 percent affordable housing and in fact a much better number would be 20 percent, possibly 10 percent.

I have read the city's response to Lockey and MacKenzie's complaint, and, I have to tell you, it is not persuasive. The city basically tells HUD that it doesn't really mind if projects are 51 percent affordable, but, unfortunately, the downtown "tax increment finance" district or "TIF" doesn't like it.

The city says repeatedly in its responses to HUD that the TIF has goals other than affordable housing, such as "upgrading the image of the area." The city tells HUD that the downtown TIF has a "desire not to concentrate a high density of affordable housing in any one area or any one building."

Ummm...so what is a TIF? Well, that's an entity set up by the city. But it's not the city. The city loves affordable housing. Oh, but that naughty TIF. It's against it. Yeah, sure. This is clever. Right?

Here's the problem. If you take the HUD money, you're supposed to obey the HUD law. You can't take the money and then not obey the HUD law because the TIF told you not to. Give the damn money back.

Let me explain how this actually went down for Lockey and MacKenzie. The TIF provides big grants of money for all of these expensive downtown re-dos. Lockey and MacKenzie went to the TIF, because that's where you go for the first sock of money.

But the downtown TIF told them they had to go to the city's housing department to see what help they could get there before the TIF could offer them anything. So they went to housing.

The housing department said it would help them get a major amount of their funding in loans under the federal Housing and Economic Reform Act (HERA). So they went back to the TIF.

Ah, but now there begins to be a lot of serious concern about all this affordable housing in the LTV proposal. At one point, Lockey and Mackenzie agree to drop their affordable housing from 51 percent to 40 percent, but they're still in the doghouse. The TIF tables their application for a grant.

Then the housing department tells them they only have 150 days to get their TIF money, or the housing department will withdraw the HERA money. Then the TIF board tells them without the HERA money, the TIF board can't give them any TIF money.

Get it? Room 5A North tells you to go to Room 5A South. Room 5A South says you have to go back to 5A North. But when you get back to Room 5A North, it's locked. And then Room 5A South says, "We don't deal with the kind of people who can't get into Room 5A North."

The table.

Before they can get themselves un-tabled, their bank forecloses on them. Then the TIF says it can't do business with people who are in foreclosure. Room 5A South is now closed for business.

They say they lost $30 million. That's a ton of money. Thirty million bucks out of people's pockets is a ton of money, especially when they were the ones trying to do right by the law.

The city wouldn't let me interview officials in person, because the city expects a lawsuit out of all this. It's reasonable for the city not to allow its employees to sit down and blab into a recorder for a newspaper reporter when they know the information is all going to be used against them in court. I do get that.

I asked Lockey and MacKenzie if they intend to sue. They say there are ways the city could clean things up short of litigation. I'm betting on a lawsuit. But the city has way bigger problems in this than a lawsuit.

HUD sent the city a letter asking the city to respond to a list of specific charges made by Lockey and MacKenzie. The city provided me with HUD's questions and the city's responses. Based on my reading, I would say HUD is not buying the city's devil-made-me-do-it story about the TIF. HUD clearly thinks the city has been instructing developers on how not to meet the HUD guidelines for affordable housing.

"Please explain why the city would approve a program design and would solicit proposals that do not meet the minimum national objective requirement for housing activities," HUD says at one point.

The city answers that it's possible to get waivers from the national guidelines and, in fact, HUD has granted such waivers in the past. But HUD comes right back and says the city doesn't even tell developers what the guidelines are. It just tells them to low-ball the affordable housing piece.

Some of this is almost cultural. Lockey and MacKenzie complain to HUD that the Dallas City Council declared in a formal resolution a year ago that the city is officially divided into two halves—the "Southern Sector" and the "Northern Sector" demarcated by the Interstate 30 expressway—and that half of all HUD money should be spent in each half.

At first I thought, "Yeah? So what? Everybody knows we have a northern sector and a southern sector." But then I thought some more. I asked myself, "What does that mean? Sector?"

Are we worried about people getting lost? Do we want to know which end of town is closer to the South Pole?

No. In this, the 10th year of the 21st century, we have adopted what we think is a new and sophisticated way to say "Colored Town."

I'm sorry. I am fully aware what an offensive term that is. But we need to be fully honest about what these terms, northern sector and southern sector, refer to. Whitey-whites one way. Dark skins the other way. And that's how we're going to hand out the HUD money?

That's definitely not in the HUD guidelines.

In fact, the city's whole approach to affordable housing flies in the face of the HUD guidelines, which are aimed at improving life for poor and working people and reducing segregation.

When two guys come along and propose a deal that comports with the HUD guidelines, the city of Dallas shows them to the table. And we all know what happens there.

There is a stunning parallelism in this story, the Trinity River, North Texas air quality and light rail planning in Dallas. In each instance, Dallas has been accustomed for decades to flouting federal rules, because the feds in every case have smirked and stared at their shoes in silence.

HUD has been granting Dallas waivers right and left on affordable housing downtown at least since the Clinton administration. In 9 years, HUD has granted Dallas and Dallas County approximately $300 million in HUD money. A question the city declined to answer for me was how many affordable housing units all that money has produced downtown.

But in a briefing memo to the council a year ago, assistant city manager A. C. Gonzalez wrote, "Unfortunately, today there are no existing affordable housing units downtown."

That's not "unfortunate." That's reprehensible.

As we are finding in all those other stories, Washington, D.C., has changed. There's a new sheriff in town. I don't believe Dallas City Hall is really worried about a lawsuit. I think they're worried about the sheriff. And should be.

Since 1998 Jim Schutze has been a columnist for the Dallas Observer, writing about local politics and culture. Schutze has been a recipient of the Association of Alternative Newsweeklies’ national award for best commentary twice and Lincoln University’s national Unity Award for writing on civil rights and racial issues three times. In 2003 he received the National Association of Black Journalists’ award for commentary. In 2011 Schutze was admitted to the Texas Institute of Letters.